On Monday, the New York Stock Exchange (NYSE) announced the development of its tokenized securities platform for trading U.S. stocks via blockchain technology. The new platform is said to enable trading on a 24/7 basis and immediate settlement of assets, among other features, and it will operate as a completely separate addition to the traditional NYSE.
The exchange claims it is also currently seeking regulatory approval for the new tokenized trading initiative. Notably, regulatory clarity around tokenized stock trading is a key component of the CLARITY Act, which is currently under discussion in Congress and recently experienced a setback in the form of crypto exchange giant Coinbase’s removal of support.
Despite Wall Street’s increased interest in the concept of tokenization oftentimes being touted as a win for crypto platforms, CoinDesk has reported the blockchains being used by NYSE are private and not public platforms like Ethereum or Solana. Unlike the decentralized crypto networks that are more frequently reported on in the press, a private blockchain is a permissioned network where access and participation are restricted to authorized entities, often controlled by a single organization or consortium of banks.
The desire to avoid the use of public networks has seen increased interest from some centralized financial institutions over the past year or two. For example, stablecoin issuers Circle and Tether are now promoting their own blockchain offerings that have stablecoin-centric features and avoid costs associated with decentralization that may not be necessary for centrally-issued, dollar-pegged assets like USDC and USDT.
That said, many private blockchain networks are compatible with the Ethereum Virtual Machine (EVM), which is a point often used by Ethereum proponents to show their technology is still having an impact, despite these private systems not having any connection to the public Ethereum network or its associated ETH crypto asset.
Of course, there are also a number of financial firms issuing stocks on public crypto networks, with the current total value of such tokens measured at roughly $850 million by RWA.xyz. Last year, Robinhood also outlined stock tokenization as the key value proposition of their own Ethereum layer-two network. This is also a major area of emphasis for more crypto-focused fintechs such as Coinbase and Kraken. At this point, it’s unclear where tokenized stocks will ultimately end up trading, but what is clear is these sorts of centralized institutions built on top of crypto’s base layers will want to maximize revenue and control, as has already been seen with the stablecoin issuers.
Increased centralization around real world asset tokens (namely stablecoins) has been a key area of concern and contentious debates over the past year, as more tech giants and banks are coming to the space to issue stablecoins rather than simply become another node on a network like Bitcoin. Indeed, NYSE’s announcement from Monday morning also points to the use of stablecoins as a funding mechanism.
As crypto has continued to rely upon stablecoins and other centralized power structures in search of greater adoption, the sector moves further away from Bitcoin creator Satoshi Nakamoto’s original design, which ironically focused on disintermediating those same sorts of financial and tech institutions.
The Bitcoin network’s focus on its own native asset (rather than centrally-issued tokens) has somewhat shielded itself from this trend towards centralization. However, growing institutional support as a long-term reserve asset, whether it be via the Harvard University endowment or the U.S. government, has led to growing concerns around the centralization of bitcoin custody. Then again, it can definitely still be used as a decentralized safe haven option in times of economic crises as well, as most recently seen in Iran.
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